Du v M5 Holdings Ltd - [2019] NZHC 2313

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2015-404-2124

[2019] NZHC 2313

BETWEEN
JIANYING DU

Plaintiff

AND

M5 HOLDINGS LIMITED

First Defendant (discontinued)

DAVID COTTER
Second Defendant (discontinued)

YUE YANG
Third Defendant (discontinued)

FENG SHI

Fourth Defendant

Hearing: 12 April 2019 (last submission 12 August 2019)

Counsel:

D Zhang for plaintiff

A Manuson for fourth defendant

Judgment:

13 September 2019

JUDGMENT OF KATZ J

[Application to set aside formal proof judgment]

This judgment was delivered by me on 13 September 2019 at 4:00pm Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors: Amicus Law, Auckland
Prestige Lawyers Limited, Auckland

DU v M5 HOLDINGS LIMITED & ORS [2019] NZHC 2313 [13 September 2019]

Introduction

[1] The plaintiff, Ms Jianying Du, issued proceedings against four defendants in respect of an investment that she made (or attempted to make) in the first defendant, M5 Holdings Limited (“M5”), which is a New Zealand company. The claims against the first, second and third defendants have now been discontinued.

[2] On 9 March 2017, I delivered judgment in favour of Ms Du against the fourth defendant, Mr Feng Shi, following a formal proof hearing (“the Judgment”). Mr Shi was not present or represented by counsel at the hearing. Both Ms Du and Mr Shi live in China.

[3] I found that in 2014, Ms Du had decided to invest in M5, which is in the business of manufacturing honey. She entered into an agreement with Mr Shi, pursuant to which he agreed to transfer to her his 22.5 per cent shareholding in M5 to her for $270,000. The parties entered into a share transfer agreement (the “Agreement”) which included a number of representations, covenants and warranties on the part of Mr Shi as transferor. On 27 June 2014, Ms Du had paid the full amount of the share purchase price. Although she was initially added to the share register by Mr Shi, she was removed shortly thereafter, due to Mr Shi’s failure to comply with the necessary requirements for transferring his shares (including the pre-emptive rights provisions in M5’s Constitution).

[4] The end result was that Ms Du had paid the full contract price for transfer of the shares, but Mr Shi had not fulfilled his part of the bargain and transferred the shares to her. I found that Ms Du was accordingly entitled to the return of the purchase price for the shares, together with costs and interest.

[5] On 18 April 2018, I issued a further judgment awarding costs in favour of Ms Du. Ms Du is currently taking steps to enforce the Judgment in the People’s Republic of China (“China”). (I will refer to the two judgments collectively as “the Judgments”).

[6] Mr Shi now applies to set aside the Judgments on the ground that he was not properly served with the proceeding. He says that he only became aware that there

were New Zealand court proceedings against him in July 2018,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Du v M5 Holdings Ltd

Details

AGLC: Du v M5 Holdings Ltd [2019] NZHC 2313
Case: [2019] NZHC 2313
Decision Date: 13 September 2019

CaseChat Overview and Summary

In Du v M5 Holdings Limited, the plaintiff Ms Du sought to enforce a formal proof judgment against the defendant Mr Shi, who sought to have the judgment set aside on the basis that he had not been properly served with the proceeding. The court found that while service was validly effected, the judgment was irregularly obtained due to a defective notice of proceeding and because it was sealed without leave of the court. The court concluded that the judgment should be set aside as there was a risk of a miscarriage of justice if it were allowed to stand. The court ordered that the formal proof judgment and costs judgment be set aside, and gave directions for costs to be determined between the parties.

The key issues were whether service was properly effected and whether the court should exercise its discretion to set aside the judgment obtained by default. The court found that while there were technical irregularities in the service, the judgment was not set aside as the irregularities were not so minor that they could not have caused prejudice. The defective notice of proceeding meant that Mr Shi was not properly informed of the court's jurisdiction and the basis for asserting it, which could have provided him with grounds to challenge the judgment. The court also found that the judgment was improperly sealed without leave, as required by the rules. These irregularities meant that the judgment should be set aside to avoid a potential miscarriage of justice.

Orders